Economy
What does Brussels say about Hungary's plans to change ad tax?
János Lázár, minister at the helm of the Prime Minister’s Office, announced on Tuesday evening that the cabinet was to modify the advertising tax, replacing the current progressive system with a flat-rate one. He said the cabinet has been receiving comments, both formal and informal, since last August about the EC having serious concerns about the advertising tax.
Portfoio turned to the EU executive for a comment on the latest developments. In its response the EC reminded that it had received a complaint last year about legislation on Hungary’s advertising tax, as a result of which it contacted Hungarian authorities and is scrutinising the compatibility of the relevant legislation with EU rules.
It also noted that a pilot procedure has been launched by the Commission's Taxation and Customs Union Directorate-General under which it sent a letter to the government on 21 August 2014, seeking basic information whether the advertising tax indirectly discriminates foreign-owned media companies or not.
The preliminary probe is still in progress. The Commission is analysing the response by Hungarian authorities and further information are being gathered, the EC added.
It also noted that the legislation in question is also being examined from the aspects of state aid rules. It has not yet reached a formal position on this one, though.
The EC would not comment on the law modification planned by the Fidesz party.
Background
János Lázár, head of the Prime Minister’s Office, said earlier this week he proposes a flat-rate system instead of the progressive one currently in place. He did not specify the new rate, but mentioned Austria as an example where the rate is 5%. The highest rate of the tax on advertising revenues is 50% and it has delivered the severest blow to RTL Klub. It was RTL’s German parent, Bertelsmann, which had filed a complaint with the EC earlier.
The minister said that "although the tax will be lower, more [companies] will be subject to it." He estimates advertising tax revenues to come in between HUF 6 billion and HUF 10 billion, against HUF 6 bn pencilled in for 2015.
The Hungarian Advertising Association stressed that the planned change to the legislation could put companies out of business and urges consultation on the matter as soon as possible.
Hungary wants a solution that would prevent EU action against the country and still be acceptable to both parties, i.e. media companies (including Bertelsmann) and the budget.
"One thing is set in stone: the revenue target in the budget must be met," Prime Minister Viktor Orbán told commercial broadcaster HírTV late on Wednesday.
"I’m in for any solution that prevents an EU procedure, is acceptable for the parties and takes into consideration the aspects of the Hungarian budget," he added.
After Bertelsmann filed its complaint in Brussels, the cabinet pledged in October last year that if necessary it would stand up for the advertising tax in front of Brussels-based institutions because this issue is related to "public burden sharing".
Portfoio turned to the EU executive for a comment on the latest developments. In its response the EC reminded that it had received a complaint last year about legislation on Hungary’s advertising tax, as a result of which it contacted Hungarian authorities and is scrutinising the compatibility of the relevant legislation with EU rules.
It also noted that a pilot procedure has been launched by the Commission's Taxation and Customs Union Directorate-General under which it sent a letter to the government on 21 August 2014, seeking basic information whether the advertising tax indirectly discriminates foreign-owned media companies or not.
The preliminary probe is still in progress. The Commission is analysing the response by Hungarian authorities and further information are being gathered, the EC added.
It also noted that the legislation in question is also being examined from the aspects of state aid rules. It has not yet reached a formal position on this one, though.
The EC would not comment on the law modification planned by the Fidesz party.
Background
János Lázár, head of the Prime Minister’s Office, said earlier this week he proposes a flat-rate system instead of the progressive one currently in place. He did not specify the new rate, but mentioned Austria as an example where the rate is 5%. The highest rate of the tax on advertising revenues is 50% and it has delivered the severest blow to RTL Klub. It was RTL’s German parent, Bertelsmann, which had filed a complaint with the EC earlier.
The minister said that "although the tax will be lower, more [companies] will be subject to it." He estimates advertising tax revenues to come in between HUF 6 billion and HUF 10 billion, against HUF 6 bn pencilled in for 2015.
The Hungarian Advertising Association stressed that the planned change to the legislation could put companies out of business and urges consultation on the matter as soon as possible.
Hungary wants a solution that would prevent EU action against the country and still be acceptable to both parties, i.e. media companies (including Bertelsmann) and the budget.
"One thing is set in stone: the revenue target in the budget must be met," Prime Minister Viktor Orbán told commercial broadcaster HírTV late on Wednesday.
"I’m in for any solution that prevents an EU procedure, is acceptable for the parties and takes into consideration the aspects of the Hungarian budget," he added.
After Bertelsmann filed its complaint in Brussels, the cabinet pledged in October last year that if necessary it would stand up for the advertising tax in front of Brussels-based institutions because this issue is related to "public burden sharing".
